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Saturday, October 12, 2013

A deal isn't in the script - yet: Boner and Obama still have plans for the gutting of Social Security and Medicare, as coward American sheep wring their hands and tremble in the shadow of White House and Congress criminals

White House talks with Republicans failed to reach an agreement to end the budget crisis on Thursday evening, but a marked change in tone from the particiants suggested a deal to end the protracted standoff could finally be in sight.

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Discussions between Barack Obama and House speaker John Boehner broke up after 90 minutes with no specific agreement, but both sides said discussions would continue to prevent the US defaulting on its debt obligations.

Earlier, Boehner sent stock markets soaring by offering to pass a temporary six-week extension to the US debt limit that the Treasury estimates will be reached on 17 October.

Republicans are also under pressure to lift their refusal to pass a separate spending authorisation, which precipiated a partial shutdown of the government, leading to the lockout of an estimated 800,000 federal workers.

Obama has insisted on at least a temporary reprieve from both threats before he would agree to negotiate over Republican demands to repeal his healthcare reforms and cut spending.

On Thursday night, it appeared the president had chosen to stand his ground, although the language was less hardline than earlier. In a statement, the White House said: "After a discussion about potential paths forward, no specific determination was made.

"The president's goal remains to ensure we pay the bills we've incurred, reopen the government and get back to the business of growing the economy, creating jobs and strengthening the middle class."

Some initial reports claimed the president had rejected Boehner's debt ceiling offer outright, but the White House statement left open the possibility that a deal was near. "The president had a good meeting with members of the House Republican leadership this evening," added the statement. "The president looks forward to making continued progress with members on both sides of the aisle."

Republican leaders told CNN they had "a good honest discussion" that did not lead to a "yes or no" from the president. Nevertheless Senate Democrats were sceptical about accepting the Republican offer of talks until the threat of continuing government shutdown was also removed.

"Mainstream media" aids and abets Congress criminals

"Not going to happen," declared majority leader Harry Reid, standing outside the White House after he and fellow Democrats met with Obama before the Republican meeting.

Earlier White House officials had given a cautious welcome to the Republican offer, but stressed they would need to see the exact wording before deciding if it was enough to proceed with formal talks.

The president is "happy that cooler heads seem to be prevailing," said spokesman Jay Carney, adding: "We would prefer to see a longer term resolution."

Republicans have been under intense pressure from business leaders and party donors to avoid a possible US default by removing the debt ceiling threat from their arsenal. But there is no guarantee that the more conservative Republicans in Boehner's caucus will support it.

US stock markets soared on news of a deal. The Dow Jones Industrial Average ended the day 323 points higher (up 2.18%). The S&P 500 rose over 36 points (2.26%). Keith McCullough, CEO of investment adviser Hedgeye, said investors had been nervous about the talks. "I changed by views on the US markets three times yesterday. That can't be good for anyone," he said. "People are sick and tired of Boehner, Obama, Bernanke or whoever dominating the markets."

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He said he was hopeful that Washington would now concentrate on "larger issues" like cutting back on the Federal Reserve's massive economic stimulus programme rather then these "sideshows".

PNC Bank senior economist Gus Faucher said: "This is an indication at least that we will get a deal on the debt ceiling. That's what has been worrying investors more than the government shutdown."

Faucher added, however, that the uncertainty was already a drag on the economy, and failure to reach a deal on the debt limit would have a "significant negative and long-lasting impact".

Earlier on Thursday the Treasury secretary Jack Lew warned there were unpredictable consequences of the continued brinksmanship, including the possibility that the US could run out of cash within days.

Obama's smoke blowing days are over

Lew accused Republicans of underestimating the danger of inadvertently triggering a stampede among investors that could rapidly drain remaining reserves.

More than $100bn (£63bn) of the US debt, known as Treasury bonds, is typically reissued every week as investors roll over their loans to the government.

This process is usually routine and does not add to the $17tn US debt pile, but simply refinances a portion of it. But markets have already been spooked by Republican threats to refuse to extend the debt limit if they do not extract concessions on healthcare reform.

Short-term borrowing costs nearly tripled in a bond auction on Tuesday as investors feared there was a risk that interest and capital repayments could be missed.

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A similar wariness to roll over bonds expiring next week could exhaust a $50bn cash reserve at any point, warned Lew. "Trying to time a debt limit increase to the last minute could be very dangerous," he said in written congressional testimony.

"If US bondholders decided they wanted to be repaid rather than continuing to roll over their Treasury investments, we could unexpectedly dissipate our entire cash balance."

Answering written questions by members of the Senate finance committee, he added: "I very much fear that miscalculation is something that could have devastating consequences. It is impossible to predict with any degree of accuracy when we will run out of money."

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